Metlife Will Pay Millions To Customers The Insurer Had Been Charged With Deceptive Sales Practices. It Settled With 28 States, Agreeing To Pay $20 Million In Fines. It Will Pay Clients $76 Million.

NEW YORK — Metropolitan Life Insurance Co. agreed yesterday to pay $20 million in fines to settle charges of deceptive sales of life insurance to thousands of customers.

The nation's largest insurance company could end up spending nearly $100 million in fines and restitution to settle charges that agents wrongfully sold consumers life-insurance policies masqueraded as retirement plans.

The penalty is one of the largest fines in recent memory against a life- insurance company, industry analysts said. It reflects a growing crackdown on improper sales practices by insurance agents, said Stephen Brobeck, executive director of the Consumer Federation of America.

MetLife spokesman Charles Sahner said the company's settlement was reached yesterday with the members of the National Association of Insurance Commissioners.

The settlement, endorsed by insurance commissioners of 28 states, involves a $20 million fine to be divided among the states. MetLife also agreed to pay about $76 million in restitution to about 60,000 customers nationwide.

Jill Chamberlin, spokeswoman for the Florida Department of Insurance, said amount of restitution could be higher if investigators find that additional policyholders were defrauded by MetLife agents.

The 28 states that signed the agreement represent 80 percent of the customers believed to be defrauded.

The $20 million fine is separate from a $1.5 million fine MetLife agreed to pay to Pennsylvania's Department of Insurance, following an investigation of MetLife sales practices in that state. The Pennsylvania probe focused not only on deceptive sales of insurance policies as "retirement savings plans" but also on the "churning" of life-insurance policies by MetLife agents in the Pittsburgh area and elsewhere.

Pennsylvania regulators also ordered MetLife to offer refunds to some 40,000 policyholders in the state, most of them people who were sold additional or replacement policies using deceptive sales practices.

Last year, MetLife conducted its own investigation of sales practices in its Tampa office, then fired several executives and refunded $12 million to customers.

"We want to move forward on our promise that not one customer will lose a dime," Sahner said.

Still, the giant insurance company, which ended last year with $128.2 billion in assets, faces considerable legal trouble.

There was speculation Texas would pursue a separate settlement. Texas Insurance Department spokesman Dana Palmer said the agency was "still studying the matter."

And MetLife faces a federal class-action lawsuit in Tampa, Fla. "We don't expect this to have any effect on our case," said Judy Hoyer, an attorney for the plaintiffs.

MetLife agents were charged with misrepresenting life-insurance plans as retirement plans, the NAIC has said. Retirement plans are fully refundable; life-insurance policies are not. Contributions to retirement plans also gain investment interest from the first payment, while the first year or two of life-insurance payments go to commissions and administrative expenses.

John Kleiman, insurance analyst at the Hartford, Conn., investment firm Conning & Co., said he expected that MetLife, with capital and surplus of $8.9 billion, could adequately handle a $97 million payout.

Chamberlin said MetLife is supposed to contact the affected customers soon to inform them of the restitution program. Customers not contacted within the next several weeks should contact their state insurance commissioner for details, she said.